Carbon Pricing Revenues Could Close Infrastructure Access Gaps

Abstract

Introducing a price on greenhouse gas emissions would not only contribute to reducing the risk of dangerous anthropogenic climate change, but would also generate substantial public revenues. Some of these revenues could be used to cover investment needs for infrastructure providing access to water, sanitation, electricity, telecommunications, and transport. In this way, emission pricing could promote sustainable socio-economic development by safeguarding the stability of natural systems which constitute the material basis of economies, while at the same time providing public goods that are essential for human well-being. For a scenario that is consistent with limiting global warming to below 2°C, we find that domestic carbon pricing (without redistribution of revenues across countries) has substantial potential to close existing access gaps for water, sanitation, electricity, and telecommunication. However, for the majority of countries carbon pricing revenues would not be sufficient to pave all unpaved roads, and for most countries in Sub-Saharan Africa they would be insufficient to provide universal access to all types of infrastructure except water. If some fraction of the global revenues of carbon pricing is redistributed, e.g., via the Green Climate Fund, more ambitious infrastructure access goals could be achieved in developing countries. Our paper also bears relevance for the design of climate finance mechanisms, as it suggests that supporting carbon pricing policies instead of project based finance might not only permit cost-efficient emission reductions, but also leverage public revenues to promote human development goals.